The EU Commercial Agents Directive gives commercial agents certain rights, including the right to claim goodwill compensation on termination of the agency.
Limiting the potential liability by “contracting out”
It has been established by case law that non-EEA producer principals cannot successfully “contract out” of their potential liability for compensation by either:
- making the agency contract subject to the law of their own country; or
- including a clause requiring disputes to be determined by arbitration in the producer’s own country – see here for more on this.
The rationale of these decisions is that the agent’s right to claim compensation is mandatory, and cannot be “derogated from” by contract.
Effect of a foreign jurisdiction clause?
It was only a matter of time before a UK court was asked to decide whether a clause in an agency contract giving the courts of another country exclusive jurisdiction to deal with disputes would prevent a UK agent from asserting his mandatory right to compensation in the UK court.
In Fern Computer Consultancy v Intergraph (High Court, August 2014) the point arose in a slightly complex way. Without going into those complexities, the bottom line is that the Judge held that a UK commercial agent may pursue a claim for compensation in the UK courts, irrespective of an express clause giving the producer’s home court (Texas in this case) exclusive jurisdiction. A technical problem meant that the agent would have to re-formulate its claim in order to proceed here, but the Judge adjourned the case to allow that, and gave strong indications that there would then be no obstacle.
Are there are any ways of limiting the potential liability?
Yes, there are. But not by trying to deprive the agent of his mandatory right to claim compensation. You also have to:
(a) get the necessary contractual provisions right, and
(b) put them in place at the outset.
Please get in touch if you would like to find out more about how to make sure that your, or your client’s, liability for this kind of compensation is kept to a minimum.
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